1. The question which this court is called upon to determine in this reference under s. 64(1) of the E.D. Act, 1953, made by the Income-tax Appellate Tribunal at the instance of the CED is as follows :
'Whether, on the facts and in the circumstances of the case, it has been rightly held that the provisions of section 10 of the Estate Duty Act have no application to the two sums of Rs. 60,000, each being the subject-matter of the trusts dated 31-8-1953 and 17-8-1957 created by the deceased ?'
2. The above question had arisen in the estate assessment proceedings of one Tricumdas Mulji Shah who died on September 25, 1964. His widow, Bai Jadhavbai, who was the original accountable person died during the pendency of this reference and her six daughters who were the only children of the marriage of Bai Jadhavbai with the deceased have been brought on the record as the heirs and legal representatives of Bai Jadhavbai.
3. The deceased had-executed two deeds of trust, the first dated August 31, 1954, and the second dated September 17, 1957. Under both these deeds of trust the said Bai Jadhavbai and one Mansukhlal Popatlal Shah were appointed the trustees. The subject-matter of each of these deeds of trust was a sum of Rs. 60,000 belonging to the deceased. Under the first deed of trust the trustees were to hold the trust property upon trust to divide the income and profits thereof into six equal parts on the 31st day of December of each year and to pay one such equal part to each of the abovementioned six daughters who are now the respondents before us. Further, under the said deed of trust, the trust property was to belong to the said daughters equally as tenants-in-common from the date of the execution of the said deed of trust and the trust property was to be divided equally amongst them on December 31, 1965. At the date of the said deed of trust the two youngest daughters were unmarried and there was a provision in the said deed of trust as to how the share of the income and the corpus coming to them was to be divided if one of them were dead. We are not concerned with this provision. Between the date of the first deed of trust and that of the second deed of trust the two unmarried daughters got married. Under the said second deed of trust the income of the trust property was to be divided into six equal parts on the 31st day of December of each year and was to be paid to each of the said six daughters. The trust property was to belong to the said six daughters equally as tenants-in common from the date of the execution of the said second deed of trust and the trust property was to be divided equally among the said six daughters on December 31, 1967. Both these deeds of trust conferred a power or in shares in limited companies or in fixed deposits with any one or more banks as also with any firms or companies including any firm in which any of the trustees or the settlor might be interested. The relevant clause conferring this power upon the trustees is cl. 4 of the first deed of trust and cl. 3 of the second deed of trust.
4. In pursuance of the power conferred upon them by the said clauses referred to above, the trustees kept the said two sums of Rs. 60,000 each in deposit with M/s. Tricumdas Mulji Shah and Company of which concern the deceased was then the sole proprietor, the business of the said concern being that of a cloth shop at Mulji Jetha Market, Bombay. In respect of the said sums so deposited interest at the rate of 6 per cent. per annum was paid to the trustees. Though the statement of the case does not mention this, it is clear from the Tribunal's order and the fact is accepted by both parties that on October 1, 1963, the deceased had returned the said said two sums to the trustees by a cheque drawn on the Bank of India Ltd.
5. In the assessment to estate duty, the Assistant Controller of E.D. held that by reason of the deposits of the said two sums of Rs. 1,20,000 with the business of the deceased by the trustees of the said trusts, the deceased was not entirely excluded from the benefit of the gifted properties which were the subject-matters of the gifts and, therefore, s. 10 of the Estate Duty Act applied to the case and the aggregate sum of Rs. 1,20,000 formed part of the estate of the deceased which passed on his death. The order of the Assistant Controller was confirmed in appeal by the Appellate Controller. In second appeal, the Tribunal held that s. 10 had no application to the case and allowed the appeal. This case has been stated and the question set our earlier referred to us by the Tribunal at the instance of the department.
6. Before considering the rival contentions, it will be convenient to reproduce the relevant provisions of s. 10 of the E.D. Act :
'10. Gifts whenever made where donor not entirely excluded - Property taken under any gift, whenever made, shall be deemed to pass on the donor's death to the extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise :Provided that the property shall not be deemed to pass by reason only that it was not, as from the date of the gift, exclusively retained as aforesaid, if, by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the donor or of any benefit to him for at least two years before the death : ..........'
7. This section came to be analysed by the Supreme Court in George Da Costa v. CED : 63ITR497(SC) , in the following words :
'The crux of the section lies in two parts : (1) the donee must bona fide have assumed possession and enjoyment of the property, which is the subject-matter of the gift, to the exclusion of the donor, immediately upon the gift, and (2) the donee must have retained such possession and enjoyment of the property to the entire exclusion of the donor or of any benefit to him, by contract or otherwise. As a matter of construction we are of opinion that both these conditions are cumulative. Unless each of these conditions is satisfied, the property would be liable to estate duty under section 10 of the Act....
The second part of the section has two limbs : the deceased must be entirely excluded, (i) from the property, and (ii) from any benefit by contracts or otherwise. It was argued for the appellant that the expression 'by contract or otherwise' should be constituted ejusdem generis and reference was made to the decision of Hamilton J. in Attorney-General v. Seccombe  2 KB 688; 1 EDC 589. On this aspect of the case, we think that the argument of the appellant is justified. In the context of the section, the word 'otherwise' should, in our opinion, be construed ejusdem generis and it must be interpreted to mean some kind of legal obligation or some transaction enforceable at law or in equity which, though not in the form of a contract, may confer a benefit on the donor....'
8. There is no dispute before us that by the medium of the machinery of the said deeds of trust, gifts were made by the donor to the beneficiaries under the said deed of trust. It is also not disputed that the said deposits by the trustees were in substance deposits made by the donees of the said deeds of trust. Though there is some confusion as to whether the said two sum of Rs. 60,000 each were, in fact, handed over by the deceased to the trustees, the matter before all the authorities has proceeded upon the basis that the donees assumed possession and enjoyment of the property, which was the subject-matter of the gift, to the exclusion of the donor immediately upon the gift being made. Thus, the first part of s, 10 would, therefore, be satisfied. What is, however, contended is that it was the first limb of the second part of s. 10 that was not satisfied in this case, namely, that the possession of the property was not retained by the donees to the entire exclusion of the donor. Admittedly, the fact that the donor returned the said deposits to the trustees on October 1, 1963, has no relevance to the matter, because the donor died within one year therefrom.
9. Section 10 has come up before different High Courts as also before the Supreme Court in a number of matters, particularly in cases where a gift was made by the donor and the amounts gifted were invested in or brought into a partnership firm in which the donor was a partner. In such cases, the gift was in cash which was immediately or within a short time thereafter deposited with the firm or was brought into the firm by the donee as his capital contribution to the partnership of which he then became a partner. There have also been cases where instead of the gift being in cash it was by making entries in the books of account of the partnership firm. Divergent views were taken by different High Courts until the matter came to be ultimately settled by the Supreme Court in CED v. Kamlavati : 120ITR456(SC) . The Supreme Court held that there was no difference between these different types of cases. The Supreme Court pointed out that the capital of a partner was not the same as the partnership property, but even treating it as partnership property, such property did not belong to a co-partner in the sense of his being a co-owner, for, even though the partnership firm is not a legal entity in the sense of having a legal personality of its own, different from that of the partners, no partner can claim a share in the partnership property according to his share in the partnership, the reason for this being that the creditor of the partnership was entitled to get back the whole of his property on dissolution of the firm or otherwise while a partner was entitled to get his share only in the net assets of the property realised on the winding-up of the partnership. The position which applies to a partnership cannot, however, apply to the case of an individual. While in a partnership, no partner can point to a particular asset of the partnership and say that he has a particular share therein according to his share in the partnership, in the case of an individual all the properties and assets of the business which that individual carried on belong wholly to that individual. The quantum of his ownership does not depend upon the outstanding of the business though the entire property of the business can be taken in execution for recovery of the loans given or the debts due by the individual. The deceased had carried on business in the trade name and style of M/s. Tricumdas Mulji Shah and Co. as the sole proprietor of that concern. When these two sums were deposited with the said proprietary concern, the person to enjoy the benefit by utilising the said aggregate sum of Rs. 1,20,000 was only the deceased. The distinction that prevails between a partner on the one hand and the partnership on the other cannot, in any way, apply here where the donor as also the proprietor of the concerned business are one and the same individual. In the case of a partnership it cannot be said that the donor and the person who is having the benefit so the deposit are identical or one and the same. It was, however, argued by Mr. Dwarkadas, learned counsel for the respondents, that this was a debt incurred by the deceased and by incurring the debt the deceased did not enjoy any benefit and, in support of this argument, Mr. Dwarkadas relied upon a passage in Lindley on Partnership, twelfth edn., at page 178, quoted by the Supreme Court in Kamlavati's case : 120ITR456(SC) . That passage is as follows :
'If a firm borrows money so as be itself liable for it to the lender, the capital of the firm is no more increased than is the capital of an ordinary individual increased y his getting into debt.'
10. The above passage in Lindley is from the section of the book which deals with a partner's power to borrow money in order to increase the capital of the firm and the sentence quoted by the Supreme Court is from that part of the discussion where Lindley discusses the power and the obligation of a partner who borrows money on his personal credit in order to put it in the capital of the firm. To our mind, it is irrelevant whether the capital of the deceased was increased by the said aggregate deposits of Rs. 1,20,000 or not. His capital certainly did not increase because this sum did not become his property permanently or for all times. It was a sum which was to be repaid by him but till then he was entitled to use it for the purposes of his business and for which he had to pay interest. Thus, the possession and enjoyment of the said sum of Rs. 1,20,000 from the time when the deposit was made until the date when it was returned to the trustees was that of the deceased who was the donor and it could not, therefore, be said that after the donees assumed possession and enjoyment of the property, which was the subject-matter of the gift, thenceforward the possession and enjoyment of such property was to the entire exclusion of the donor. For this reason, the condition of the said s. 10, which the Supreme Court described as the first limb of the second part of the said section, has not been complied with in the present case and, therefore, the application of s. 10 is not excluded.
11. For the above reasons, we answer the question referred to us in the negative, that is, in favour of the department and against the accountable persons.
12. The respondents will pay to the applicant the costs of this reference.